NRF: Retail sales growth slows to near-standstill

By Daphne Howland | March 16, 2016

Dive Brief:

• February saw muted spending as consumers hedged their bets in the face of stock market volatility, according to the National Retail Federation.
• Seasonally adjusted retail sales (excluding automobiles, gas stations and restaurants) increased 0.1% from January, equal to the rise from December to January, which was revised from 0.6%. 
• Year over year, seasonally adjusted February retail sales grew 3.8%. February’s leap day, along with the extreme weather of a year ago, led the NRF to change up its methodology and report seasonally adjusted numbers. On an unadjusted basis, February retail sales rose 6.7% year over year, the NRF noted.

Dive Insight:

It’s not hard to spook today’s American consumer, and the punches the stock market took in the early part of the year apparently did just that. But the National Retail Federation, which runs its own calculations using the U.S. Commerce Department’s numbers, remains sanguine about the rest of the year.

What spending increases there were benefited from increases in home-related sectors, especially sales of building materials and supplies, and furniture and home goods. Sporting goods and online and other non-store sales gained. Mild weather in many parts of the country also continued to drive interest in spring clothing, according to the NRF.

“While spending moderately, consumers are navigating through the heavy fog of market turbulence experienced earlier this year,” NRF chief economist Jack Kleinhenz. “Looking at the bottom line, consumer spending is on track to rise, which is good news for the economy.”

The NRF released its economic forecast for 2016 last month, with retail sales (excluding autos, gas stations and restaurants) expected to grow 3.1% over the year. Non-store sales, which includes e-commerce, are expected to grow between 6-9%. The NRF additionally projected that employment will grow, with around 190,000 jobs added per month—a pace that's down from 2015—while unemployment will drop to 4.6% by the end of the year. 

As consumers increasingly gravitate towards experiences rather than material purchases, retailers will have to realign their business strategies to provide more value to consumers that visit their stores. This includes offering services and special events in their stores, streamlining omnichannel operations, and shaking up traditional marketing plans to offer resources and entertainment to shoppers. Providing a fluid shopping experience from their e-commerce websites to their physical stores could also help traditional retailers recapture the sales that are moving online.